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Does financialization affect firm’ R&D investment? Evidence from China

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  • Liu, Li
  • He, Jun

Abstract

This paper explores the impact of financialization on firms’ R&D investment and innovation. Based on listed companies in Chinese stock markets, we find that financialization significantly inhibits firms’ R&D investment. To further investigate the above relationship, we introduce the square of the financialization into the regression and find that there is a significant inverted-U relationship, indicating that moderate financialization can promote corporate innovation, while excessive financialization significantly inhibits it. Our findings enhance our understanding the determinants of financialization on R&D investment. In addition, we also provide policy implications for regulators that are concerned with corporate financing and innovation.

Suggested Citation

  • Liu, Li & He, Jun, 2023. "Does financialization affect firm’ R&D investment? Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006839
    DOI: 10.1016/j.frl.2023.104311
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